Category: genres

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Competition among Sponsored Search Services

Edelman, Benjamin. “Competition among Sponsored Search Services.” U.S. House of Representatives, Committee on the Judiciary, Task Force on Competition Policy and Antitrust Laws, 2008. (Hearing cancelled.) (Reprinted in Working Knowledge: Google-Yahoo Ad Deal is Bad for Online Advertising.)

Last month I was asked to testify to the United States House of Representatives Committee on the Judiciary Task Force on Competition Policy and Antitrust Laws about competition among paid search providers, particularly the proposed Google-Yahoo partnership.

At the last minute, the hearing was cancelled, and I won’t be able to testify at the rescheduled session. Rather than let my draft written statement languish, I’m taking this opportunity to post the prepared testimony I had planned to offer:

Competition among Sponsored Search Services.

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Microsoft adCenter (teaching materials) with Peter Coles

Coles, Peter, and Benjamin Edelman. “Microsoft adCenter.” Harvard Business School Case 908-049, January 2008. (Revised February 2010.) (educator access at HBP. request a courtesy copy.)

Microsoft considers alternatives to expand its presence in online advertising, especially text-based pay-per-click advertising. Google dominates, and it is unclear how Microsoft can grow, despite considerable technical and financial resources. Microsoft considers a set of alternatives, each with clear benefits but also serious challenges.

Teaching Materials:

Microsoft adCenter (Teaching Note) – HBP 908062

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TheLadders (teaching materials) with Peter Coles, Brian Hall, and Nicole Bennett

Coles, Peter A., Benjamin Edelman, Brian J. Hall, and Nicole Bennett. “TheLadders (A).” Harvard Business School Case 908-061, April 2008. (Revised March 2015.) (educator access at HBP. request a courtesy copy.)

Despite strong appeal among job seekers and outside recruiters, TheLadders’ corporate job listings seem to lag. Could raising prices help solve the problem? TheLadders considers this strategic paradox.

Supplments:

The Ladder (B) – Supplement (HBP 914017)

The Ladder (C) – Supplement (HBP 916017)

Teaching Materials:

The Ladder – Teaching Note (HBP 909005)

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Opening Dot EU (teaching materials)

Edelman, Benjamin. “Opening Dot EU (A).” Harvard Business School Case 908-052, March 2008. (Revised April 2008.) (educator access at HBP. request a courtesy copy.)

EURid considers possible market mechanisms to allocate initial domain names within the Internet’s newly-created “dot EU.” European Union regulations and community norms substantially constrain EURid’s approach, preventing the use of the most natural economic mechanisms (such as auctions).

Supplement:

Opening Dot EU (B)- Supplement (HBP 908053)

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Delaying Payment to Deter Online Advertising Fraud

In a new article, I introduce an alternative method of fraud prevention for certain online advertising systems. By delaying payments, a merchant or network differentially harms bad affiliates (who rightly worry they may get caught) without unduly harming good affiliates (who know they’ll get paid, and who receive a bonus in compensation for the delay). With a suitable delay, a merchant or network can deter many bad affiliates while retaining the good.

My working draft:

Optimal Deterrence when Judgment-Proof Agents are Paid in Arrears – with an Application to Online Advertising Fraud

Details on my approach, including initial data on merchants’ and networks’ current payment terms.

(update: published as Edelman, Benjamin. “Deterring Online Advertising Fraud Through Optimal Payment in Arrears.” Financial Cryptography and Data Security: Proceedings of the International Conference (September 2009). (Springer-Verlag Lecture Notes in Computer Science.))

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On Best-Response Bidding in GSP Auctions

Cary, Matthew, Aparna Das, Benjamin Edelman, Ioannis Giotis, Kurtis Heimerl, Anna R. Karlin, Claire Mathieu, and Michael Schwarz. “On Best-Response Bidding in GSP Auctions.” Harvard Business School Working Paper, No. 08-056, January 2008.

How should players bid in keyword auctions such as those used by Google, Yahoo! and MSN? We model ad auctions as a dynamic game of incomplete information, so we can study the convergence and robustness properties of various strategies. In particular, we consider best-response bidding strategies for a repeated auction on a single keyword, where in each round, each player chooses some optimal bid for the next round, assuming that the other players merely repeat their previous bids. We focus on a strategy we call Balanced Bidding (BB). If all players use the BB strategy, we show that bids converge to a bid vector that obtains in a complete information static model proposed by Edelman, Ostrovsky, and Schwarz. We prove that convergence occurs with probability 1, and we compute the expected time until convergence.

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Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords

Edelman, Benjamin, Michael Ostrovsky, and Michael Schwarz. “Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords.” American Economic Review 97, no. 1 (March 2007): 242-259.

Winner of the 2013 Prize in Game Theory and Computer Science from the Game Theory Society (for “the best paper at the interface of game theory and computer science in the last decade”).

Winner of the 2018 SIGecom Test of Time Award from the ACM Special Interest Group on E-Commerce (for “an influential paper or series of papers published between ten and twenty-five years ago that has significantly impacted research or applications exemplifying the interplay of economics and computation”).

We investigate the “generalized second-price” auction (GSP), a new mechanism used by search engines to sell online advertising. Although GSP looks similar to the Vickrey-Clarke-Groves (VCG) mechanism, its properties are very different. Unlike the VCG mechanism, GSP generally does not have an equilibrium in dominant strategies, and truth-telling is not an equilibrium of GSP. To analyze the properties of GSP, we describe the generalized English auction that corresponds to the GSP and show that it has a unique equilibrium. This is an ex post equilibrium, with the same payoffs to all players as the dominant strategy equilibrium of VCG.

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Strategic Bidder Behavior in Sponsored Search Auctions

Edelman, Benjamin, and Michael Ostrovsky. “Strategic Bidder Behavior in Sponsored Search Auctions.” Decision Support Systems 43, no. 1 (February 2007): 192-198. (Winner of Emerald Citations of Excellence.)

We examine sponsored search auctions run by Overture (now part of Yahoo!) and Google and present evidence of strategic bidder behavior in these auctions. Between June 15, 2002, and June 14, 2003, we estimate that Overture’s revenue from sponsored search might have been higher if it had been able to prevent this strategic behavior. We present a specific alternative mechanism that could reduce the amount of strategizing by bidders, raise search engines’ revenue, and also increase the overall efficiency of the market. We conclude by showing that advertisers’ strategic behavior has not disappeared over time; rather, such behavior remains present on both search engines.